Forget Stars—Companies Do Best When They Grow Their Own Talent

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Forget Stars—Companies Do Best When They Grow Their Own Talent

Oliver Munday

Ron Johnson’s superstar status was unassailable. By 2011, after more than a decade at Apple, the senior vice president of retail had built a wildly lucrative network of retail stores. Credited with innovations like the Genius Bar, Johnson turned the Apple Store into an iconic destination and a money-­making machine. His success didn’t go unnoticed: JCPenney soon came knocking with a CEO offer, and Johnson jumped.

He did not stick the landing. Within 17 months of being hired, Johnson was axed. His attempt to transform JCPenney into something hip ignored the retailer’s history and customers, driving the company’s stock down 50 percent and alienating its core shoppers in a little more than one year. His time running the discount chain was described by columnist Jeff Macke as “one of the most aggressively unsuccessful tenures in retail history.”

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Johnson is no outlier. There are countless examples of star executives, programmers, and engineers wooed from one company only to flame out at another. Former Google golden child Marissa Mayer, for example, is now tasked with selling off, piecemeal, the very company she was hired to save. G. Richard Thoman, a big-shot CFO at IBM, spent even less time as CEO of Xerox than Johnson did at JCPenney. These accomplished executives didn’t fail up, they succeeded down—succumbing to an oversimplified and unrealistic view of what a superstar is and what they can accomplish.

Yet hiring managers, VCs, and tech-focused talent agencies worship at the altar of the A-player, assuming that they need a fleet of superstars to build a great company. And they’re willing to steal them, if necessary. Apple and Tesla, for example, potential rivals in the electric car market, have been engaged in such a fierce poaching war that they’ve even recruited away each other’s job recruiters. After all, exceptional employees aren’t just a little bit better than the average worker. They’re 1,000 times better. They’re more productive, more creative … more everything. We should shower them with money and perks and do whatever it takes to keep them happy. Right?

Wrong. Companies are better served when they double down on cultivating in-house talent instead. Sure, superstar workers exist. And yes, they can be extremely productive and beneficial to a company’s bottom line. But their stardom is frequently context-­specific, and it doesn’t always survive the transfer. When Harvard Business School professor Boris Groysberg looked at the talent portability of 1,052 rock-star financial analysts, he found that about half did poorly in the year following their switch. And those whose work suffered never recovered.

Elon Musk famously called Apple 'the Tesla graveyard.'

Indeed, Elon Musk famously called Apple “the Tesla graveyard,” a place where the company’s failed engineers go to die (careerwise, presumably). But that doesn’t mean Apple was fooled into hiring Tesla’s duds. More likely, many of those engineers were brilliant but didn’t get the chance to shine for any one of thousands of reasons. Star talent is partly innate, sure, but it’s also linked to specific teams and projects or just the culture of a company. As Jeffrey Pfeffer, a professor of organizational behavior at Stanford, puts it: “People’s performance is a function not just of their individual abilities but also of the systems in which they work.” Talent, it seems, really hates to move around.

Unless it belongs to a woman. A higher percentage of female analysts in Groysberg’s study continued their great performances when they changed employers than their male counterparts. Mostly, Groysberg says, that had to do with their minority status in a male-­dominated (and often very sexist) investment-­banking culture, which ensured they paid more attention to institutional context than the men did. They were more discerning about where they went.

Some companies, like Google, are starting to use a more data­centric approach that focuses on finding and developing talent in-house rather than hiring it away from the competition. But there are still plenty of others whose MO basically amounts to: Find established star players; hire them away with the help of ridiculous perks; hope to profit.

What companies should really focus on identifying aren’t the stars but the black holes. In one recent study at Harvard Business School, professor Dylan Minor looked at the effects of so-called toxic workers on corporate performance. These bad apples weren’t just unpleasant to be around, Minor says, they also cost companies significant chunks of money through decreased worker morale, high turnover, and, in extreme cases, litigation. While a top-1-percent superstar may deliver $5,303 in savings per year through increased performance, Minor found, firing, fixing, or avoiding a toxic worker altogether can net $12,489.

It’s hard to resist a superstar’s immense gravity. But we shouldn’t let our fascination with these elite talents overshadow the circumstances that allow them to excel. Nor should we assume that their talents will perfectly translate to new situations. If Silicon Valley wants to keep innovating, it needs to stop treating talent like some static commodity to be worshipped and poached, and start directing resources toward creating corporate cultures where talent can be grown and supported. Either that, or just stick to poaching women.